Many Australians are optimistic about their financial future, despite expecting the economy to be affected by COVID-19 for as long as a year.
KPMG reports conclude that two in three Australians are optimistic about their financial future. A mid-May survey of 1500 consumers found 60 per cent “have been able to maintain a ‘steady state’ with little impact to their financial circumstances”.
And two-thirds of participants were “confident or neutral about the likelihood of their financial position recovering in the next six months”.
This is despite the most recent Pulse of the Nation survey (3 July) finding that 80 per cent of Australians expect to be personally affected by the coronavirus pandemic for more than three months. That survey found 25 per cent of Australians “report having difficulties paying for essential goods and services”, while 40 per cent reported being financially ‘comfortable’.
Recent weeks of the survey revealed “49.7 per cent of respondents believe the economy will still be affected by COVID-19 beyond one year”.
More than 50 per cent of respondents were “vulnerable to financial stress (as in already financially stressed or just making ends meet)” throughout the 13 weeks of the survey.
Melbourne Institute researcher Professor John P. de New says the contrast between expectation for oneself and expectations for the economy, is an example of the ‘better-than-average effect’ or ‘optimistic bias’.
“Our research shows that females and those in employment have higher propensities to form their expectations with more ‘optimism’,” Prof. de New said. “This better-than-average effect could be beneficial in kickstarting the economy. Sixty-six per cent of the respondents are in employment and likely to drive consumer spending, having the economic resources to do so.”
Ten per cent of the KPMG survey respondents were classified as ‘survivors’ suffering significant financial impacts, while 32 per cent (‘preservers’) have experienced some disruption to their financial circumstances due to COVID-19, with this group likely to have had their income affected through either a reduction in hours or wages.
A recent survey of more than 3000 YourLifeChoices members showed that falling equity markets had triggered a rethink about retirement savings.
The April 2020 Ensuring Financial Security in Retirement survey found, unsurprisingly, that the No.1 financial concern for retirees was losing their savings as share markets fell.
Australian Financial Review columnist Karen Maley believes the government’s economic stimulus measures have worked.
“This extraordinary level of fiscal, monetary and spending stimulus has meant that many individuals and businesses have been able to withstand the economic downturn far better than had been initially feared,” she said.
Ms Maley reports that bankers believe their customers’ financial position seems “surprisingly strong”.
“This has made bankers much less anxious that the economy will face an abrupt economic cliff in September when the Morrison government’s wage subsidies are due to end.
“At this stage, bankers remain quietly confident that they’re unlikely to suffer hefty losses in their massive mortgage books, despite the slowdown in economic activity and the spike in unemployment.
Those who have retained their jobs have reduced costs, and those working from home are saving money on public transport, tolls, parking, coffees and lunches. The closure of borders has reduced travel costs.
Some businesses are also defying the coronavirus downturn.
“Most of our business accounts are doing really well,” a senior banker noted. “Those that have a heavy online presence or are strong on social media presence have done pretty well.
“Obviously, Victoria will take a hit now, but it’s not as doom and gloom as everybody expected.”
KPMG found that consumers are showing more discernment when engaging with insurance and wealth services.
“All consumers are currently seeking better value and flexible propositions from financial services providers in Australia.”
KPMG also identified consumer trends expected to outlive the coronavirus crisis, says nestegg.com.au.
“These include: an increasing comfort around digital service provision and engagement with financial service providers, the placement of higher value on personalised connection, a renewed focus on health and wellbeing, a willingness to act for greater social good, and a ‘back to basics’ approach to finance and investment.”
Are you optimistic about your financial future? What steps have you taken to be better prepared for a significantly changed outlook?
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